Measuring What Matters in Nonprofits

Every nonprofit organization should measure its progress in fulfilling its mission, its success in mobilizing its resources, and its staff's effectiveness on the job. Most nonprofit groups track their performance by metrics such as dollars raised, membership growth, number of visitors, people served, and overhead costs. These metrics are certainly important, but they don't measure the real success of an organization in achieving its mission. Of course, nonprofit missions are notoriously lofty and vague. The American Museum of Natural History, for example, is dedicated to "discovering, interpreting, and disseminating--through scientific research and education--knowledge about human cultures, the natural world, and the universe." But though the museum carefully counts its visitors, it doesn't try to measure its success in discovering or interpreting knowledge. How could it? The pace of scientific discovery hardly depends on the activities of a museum--even one as prominent as this. Similarly, CARE USA exists "to affirm the dignity and worth of individuals and families living in some of the world's poorest communities." Try to measure that. Our research on 20 leading nonprofit organizations in the United States--as well as our firsthand experience with one of them, The Nature Conservancy--shows that this problem is not as intractable as it may seem. Although nonprofits will never resemble businesses that can measure their success in purely economic terms, we have found several pragmatic approaches to quantifying success, even for nonprofit groups with highly ambitious and abstract goals. The exact metrics differ from organization to organization, but this thorny problem can be attacked systematically. To grasp the complexity of the task--and the serious problems of the approach that most nonprofits currently use--consider the experience of The Nature Conservancy. Bucks and acres For 50 years, the Conservancy has had a clear mission: to preserve the diversity of plants and animals by protecting the habitats of rare species around the world. For most of the history of this organization, it measured success solely by the second, more tangible, part of its mission: protecting habitats. Thus it would simply add up the amount of the annual charitable donations it received and the number of acres it was protecting. These metrics soon became enshrined as "bucks and acres." As a measurement system, bucks and acres had a lot going for it. Managers clearly understood how their programs would be judged and could act accordingly. The board of governors liked the emphasis on buying land--an approach that set the Conservancy apart from other environmental organizations: donors responded well to the clarity and simplicity of dollars raised and land saved. These metrics told a tale of success (Exhibit 1). The Conservancy--the world's largest private conservation group--has protected 12 million acres in the United States and millions of additional acres in 28 other countries. Last year, its membership climbed to 1.1 million people and its revenue to $780 million. Without question, the upward trajectory of these statistics bolstered the morale of the staff, increased its motivation, and inspired confidence among donors. Despite this apparent success, in the early 1990s Conservancy managers began to realize that bucks and acres didn't adequately measure the progress of the organization toward achieving its mission. The Conservancy's goal, after all, isn't to buy land or raise money; it is to preserve the diversity of life on Earth. By that standard, the Conservancy had been falling short every year of its existence. It had its successes, but the extinction of species continued to spiral out of control: one Harvard biologist, E. O. Wilson, estimates that the extinction rate today is as high as it was during the great extinction that wiped out the dinosaurs 65 million years ago. …